Europe October caprolactam negotiations expected to be tough

13 October 2010 14:18  [Source: ICIS news]

LONDON (ICIS)--European October caprolactam contract price discussions are expected to be tough and a speedy settlement is not anticipated, producers and consumers said on Wednesday.

“Negotiations are only just starting, a little delayed because of EPCA [European Petrochemical Assiciation meeting in Budapest], but I don’t expect a speedy settlement,” a major producer said.

The producer voiced its intention to increase the October contract price by €20/tonne ($28/tonne) despite a €36/tonne drop in the October benzene contract.

"The market will remain strong for the next two years and exceedingly strong for the next six months. The October increase will be €20/tonne to address the shortness in the market since it will get even shorter,” the producer said.

A second larger European producer also said it was not prepared “to share” any of the benzene price reduction because “demand was strong and supply was tight”.

A third global major continued to look to Asia for price direction and he too said that he was not prepared to reduce the price of caprolactam in October regardless of a fall in feedstock benzene.

“Asia remains much more interesting and Europe buyers are now in competition from Asia buyers. We see the strong demand continuing but the question is how we sever all the markets?” the major producer said.

In relation to October cyclohexane contract price intentions, the producer did not see any reason why prices should come down.

Producers need to bridge the gap between the values of caprolactam in Europe versus Asia, which continues to frustrate some buyers in Europe.

“I am sick and tired of the Asian argument. I don’t see the producers doing anything with their polymer price in Asia. They [the producers] feel they should keep moving the prices up because there is healthy demand, but I would prefer to see a decent margin month on month rather than be pushed to the limits,” said the buyer.

The buyer went on to say that it failed to understand the motivation of its supplier and that something should be given back to the customers.

Other larger buyers voiced similar feelings in relation.

One said: “Negotiations have not started yet but our suppliers have announced a rollover. But on the contrary they [the producers] should give us some of the benzene decrease. It’s difficult to say if we are in a really tight situation.”

A second added: “Everybody is at the beginning of their negotiations and we will need to wait another week. Buyers are looking for the benzene €36/tonne reduction. The market is good but not that good to get another improvement on price.”

Caprolactam is an intermediate primarily used in the production of nylon 6 fibres and resins. Just over 70% of caprolactam is consumed in the production of nylon fibres with the rest used in engineering resins and films.

($1 = €0.72)

For more on caprolactam visit ICIS chemical intelligence
To discuss issues facing the chemical industry go to ICIS connect

By: Julia Meehan
+44 20 8652 3214

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